Tax Deadline Approaching for Taxpayers with Extension
Taxpayers who filed extensions of time to file must file their income tax return and FBAR by October 16th to avoid failure-to-file penalties
Americans living abroad must file a U.S. tax return to report their income, even if they did not earn that income in the U.S. According to a Treasury Inspector General for Tax Administration (TIGTA) study, about 7.6 million U.S. citizens living overseas are required to file tax returns. However, the U.S. Government Accountability Office has reported significant noncompliance among U.S. taxpayers living abroad.
After the implementation of the Foreign Account Tax Compliance Act (FATCA), a number of IRS initiatives have been created to increase tax compliance for Americans living abroad. As the IRS ramps up its efforts to close the international tax gap, it is more important now than ever that expats ensure their tax returns and reports of foreign bank and financial accounts (FBARs) are filed on time.
This year, if a taxpayer filed an extension of time to file their income tax return, the due date for their return and FBAR is October 16th. After that date, their return will be considered late, and they could be assessed with a late filing penalty. These penalties can be significant, even if they don’t owe any income tax when they file their return. With that in mind, it’s extremely important for Americans living abroad to complete their tax return by the extended deadline.
Even if they have filed an extension, they may not want to wait until October to complete their tax return. If they have a balance due, failure-to-pay penalties and interest begin to be assessed in June and April, respectively. Failure-to-pay penalties accrue at 0.5 percent of the balance due on a monthly basis while interest accrues on a daily basis at 4 percent per year.
Expats who are unsure where to get started can have their U.S. tax returns and FBARs completed by H&R Block tax experts in a retail office. In addition, they can use H&R Block’s virtual service to work with a tax advisor who specializes in working with Americans living overseas. From handling the tax consequences of Australian superannuation funds, to Mandatory Provident Fund accounts in Hong Kong, or Pillar III pensions in Switzerland, H&R Block’s expat tax experts are equipped to address the unique tax issues faced by American expats.
For more information, taxpayers should visit hrblock.com/expats where they can access expat tax advisors through the virtual service.
Eric Scali is an Attorney with a Masters of Law in Tax and is a Program Manager for H&R Block Expat Tax Services. Eric has been providing international tax advice & preparation support for taxpayers at the H&R Block Headquarters in Kansas City since the start of H&R Block Expat Tax Services. Before that, he led a team of tax researchers focused on international tax questions at H&R Block’s Tax Institute.
Penalties for not filing a tax return or not paying taxes are well-known, but there are many more tax penalties. Knowing how to avoid them when possible, and minimize them when unavoidable, is key.
Not filing taxes by April can mean penalties and interest for most of us, but not everyone’s filing deadline is in April. Find out who has an extended tax deadline.
Read Jeff Jones’ statement on protecting taxpayers from the 2018 IRS Security Summit with the new IRS commissioner, fellow tax industry CEOs, and state tax commissioners.
Tax identity theft is a multi-million-dollar business. In 2016, the IRS identified more than 1 million fraudulent returns.